Synthomer plc

Good morning and welcome to our 2026 first half results presentation. I am here with Ian Torrance who joined us in May as interim CFO and who some of you will already know and Faisal Taba, head of investor relations and together we look forward to answering your questions at the end. In terms of the agenda, I will provide an overview of our strong performance and the further strategic progress we made in the first half. Ian will then walk through the numbers in more detail before I come back to present the strategic actions we have been taking in line with our sustained efforts to become a more specialty focused business. Then at the end we will discuss what we expect for the remainder of the year. So let me begin with the highlights and the five headline points that frame our first half performance and the strategic context in which it was delivered. Against the backdrop of a market environment which remained complex to navigate, we delivered a first-half performance that was ahead of expectations. Our revenue grew 5% in constant currency, EBITDA rose 13%, EBIT was up 36% alongside gross margin expansion of nearly 200 basis points and EBITDA margin improvement of 80 basis points to a remarkable 10.1%. This is a strong set of numbers and reflects the compounding effect of the strategic and operational actions we have taken over the past few years and that we have continued to execute with determination and discipline. Our progress in the first half was primarily driven by consistent strategy delivery and self help. Innovative new products and accessing new markets are an important part of our strategy. In the period, this included positive developments in intermescent coatings for data centres, additives for onshore oil and gas drilling, medical adhesives and non-woven fabrics. We have also focused on increasing our global reach with good regional growth in China, the US and the Middle East. All three divisions generated volume and revenue growth in the period. In addition to self-generated growth and ongoing cost savings, we also anticipated our performance would reflect some expected cost headwinds, as we identified at the start of the year. Net of Rage Inflation and Bonus Normalization all divisions increased EDBA margins in the period. in all but especially in difficult or uncertain times it is important to have a strong business model and from this perspective we are increasingly well positioned you have robust supply chains world-class global procurement capabilities a focus in region for region manufacturing footprints and differentiated specialty products with real pricing power These underlying strengths of our business model put us in a robust position to continue to support our customers through a lower demand environment and through the recent dislocation in global chemical value chains. And in some areas, most notably the MDR business, we experienced meaningful increases in activity during Q2 as some of our competitors found it challenging to fulfill supply commitments. is one of gains we are not currently forecasting to recur in H2. My fourth point, we continue to execute our strategy with consistency. Throughout all the geopolitical and market disruption and uncertainties, this remains our guide. Our successful debt refinancing in April has ensured we have a stable financial platform to continue to transform the business and the runway to execute our plans. As part of this, we made further progress in our program of non-core-based chemical divestment. In June, we announced the divestment of acrylic monomers, removing a capital-intensive and cyclical upstream-based chemicals business that diluted margins and cash conversion. In addition, we have three further divestment projects underway to enhance our strategic specialty focus and capital efficiency, or put simply, to reduce net debt. My final point before I turn over to Ian, we are today raising our outlook for the full year. With a strong first half driven mainly by recovering strategic progress and cost savings, which we expect to continue into the second half, we now expect to deliver a full year 2026 performance ahead of current market expectations and well ahead of previous year. This and our ongoing cash discipline also supports our expectations of improved free cash flow delivery and faster deleveraging over the course of the year. I will return to discuss strategic progress and the outlook in more detail. But let me now hand over to Ian to walk you through the numbers.

Many thanks Michael and good morning. As Michael has already covered, the first half of 2026 has seen a strong performance by the group. with our focus on speciality growth, the strength of our regional manufacturing model and excellent procurement function underpinning 13% EBITDA growth and an 80 basis point improvement in our EBITDA margin. Let me start in slide 6 by reminding you that at the end of June we agreed terms to sell the Accolade Monomers business in the Czech Republic with the transaction expected to close at the end of September. Therefore, in line with IFRS, this business has been treated as discontinued for the purposes of the H1 results, eliminating the prior year losses and increasing the half-year 25 EBITDA comparator for the business to 83.1 million. One of the key consequences of this change is that it masks the 5 million improvement the team has delivered in that business. Including this improvement, EBITDA grew more than 20% in H1 It is testament to the skills of the team that we've been able to deliver a step change in the business's operational efficiency enabling it to capture favourable market conditions and to get set up for the years ahead where Syntema will benefit from a share of any excess cash generation. Focusing on the continuing business we saw revenues increase by 6.7% on a reported basis to 954 million. On a constant currency basis Weakness in the Euro and Malaysian Ringgit and a stronger US dollar relative to the pound led to 5.1% growth with all three divisions ahead. Volumes increased across all three divisions with overall volumes up 2.3% on the prior year, led by a strong performance in accessing long-term growth opportunities in CCS. and the health and protection business benefiting from its ability to support customers amid the market disruptions created by the armenian conflict the business as a whole was fast and bold in passing through increased raw material prices in q2 to customers and together with the growth in the more specialist high margin elements of our tribute to a further 2.8 percent to growth in revenue In total, EBITDA of the continuing business has increased by £14 million versus the prior period, which is after taking account of both wage inflation and the need to normalise our bonus accrual, as previously mentioned. We have attempted to break down the components of that growth and whilst it is difficult to be precise, I would estimate that around £8 million is recurring in nature. including the growth we've seen in some of our more specialist products like intumescent coatings used in data centres, energy solutions used in oil and gas grilling, and the action taken to manage costs. The remaining 6 million I would attribute more directly to the market disruptions seen in Q2, which we are not currently forecasting will continue into H2. Going further down the income statement, EBIT increased by almost 42%, with depreciation down slightly and after taking account of both the stronger performance by acrylic monomers and the higher finance costs we saw total group pvt increased by 11.4 million to 12.7 million pounds special items in operating profit were 7 million higher in the period reflecting a net cost of 36.4 million the movement principally reflecting a non-cash triop of past pension service costs due to late retirees in our US scheme. For the full year, I would expect that special items will be in the range 60 to 65 million pounds, two thirds of which relate to the amortisation of acquired intangibles. EPS benefits from an H1 tax credit, which will largely reverse in the second half. And finally, net debt was 671 million pounds, at the end of June slightly better than expected which I will cover in more detail later in the presentation turning now to the divisions starting the CCS in slide 7 CCS saw robust earnings in growth in the period as a number of the long-term strategic and commercial initiatives contributed to our journey towards a more specialist product mix revenue for CCS was up 8 million pounds Representing headline growth of 7.5%, 5.8% on a constant currency basis Volume grew 2.5% year-on-year, led by intermescent and other high performance codings used in data centres and other industrial applications A strong performance by energy solutions and a return to growth in construction, particularly in Asia while decorative coatings and consumer material volumes contracted slightly in the period. On a regional basis, both Asia and the US performed strongly, reflecting recent management changes in Americas. H1 saw the CCS gross margin continue to strengthen as the shift towards speciality products improved the portfolio price-volume mix and steps were taken in late Q1 to proactively respond to market conditions to increase prices. optimised plant loadings and leveraged central procurement services. These factors together with continued focus on costs resulted in EBITDA increasing by 33% to £46 million and the margin expanded by 220 basis points to 11.5%. Turning to the adhesive solutions division on slide 8 which grew revenue by 2.6% in constant currency as the combination of volumes increasing by 0.9% and the pass-through of higher raw material prices in Q2 was partially offset by an increased percentage of base chemicals in the mix. Geographically we saw growth in all three regions with Asia and China leading the pack followed by the US with packaging and towers the leading end markets. Whilst overall market demand remained relatively subdued in the period we are particularly pleased with the volume growth in our sustainability offerings and how the business is harnessing our china innovation center to drive domestic growth notwithstanding the intermittent reliability issues experienced during h1 at our facilities in texas and the netherlands the business benefited in early q2 from a number of asian competitors temporarily implementing force majeure as a result the product mix in h1 is slightly more skewed than normal towards base products the division continues to make further savings from the transformation initiated in 2023 and is on course to achieve 40 million pounds of annualized benefits by the end of this year with the target remaining to achieve 43 million pounds plus taking account of these savings and the other progress on a constant currency basis the eva da from AS increased by 4.5% year-on-year to £36.7 million with a margin expanded by 20 basis points to 12.1%. Turning to the third division HPPM on slide 9. On a continuing basis the division as a whole delivered revenue of £249 million in H1 of 11.7% on the prior year. as the health and protection business in particular benefited from its market-leading position during the recent supply-side disruptions in Asia with EBITDA for the division growing 13.7% on a reported basis to £24.9 million and the margin expanded by 20 basis points to 10%. Turning to the individual components of HPPM the health and protection business and its combination of standalone manufacturing facilities in malaysia and italy coupled with the group's global sourcing capabilities proved to be uniquely placed to capitalize on recent market disruptions volume increased 13.5 percent year-on-year with significant volatility in both raw materials and finished good pricing being a feature of both april and may looking forward as prices have somewhat normalized we are not currently forecasting for the performance even q2 to continue into the second half However, the health and protection leadership team continued to explore opportunities to exploit our market leading capabilities in NBR manufacturing and support customers in the development of innovative, thinner and reusable gloves. Conditions across the rest of the division's portfolio were more mixed. Volumes for the continuing performance materials businesses fell by 5% year on year, principally from weaker demand. in certain foam products and speciality vinyl polymers both partly also to do with conflict disruption however the combination of raw material prices and mix led to increased revenues overall and we continue to focus intensively on process optimization and cost efficiency throughout this division i want to turn next to the balance sheet slide 10. as reported at the year end we completed the refinancing of our core debt facility on the 30th of April and today have approximately 680 million pounds of bank and UKIP facilities which mature in February 2029 and euros 350 million of bonds that mature in July 2029 at the 30th of June total borrowings against these facilities was 874 million pounds with a net debt standing at 671 million which on a covenant basis resulted in leverage of 4.9x as a reminder under the terms of our new facilities the year-end covenant requirement is now 6.25 times and the first quarterly covenant on the 30th September is higher than that so our headroom is significant and we had nearly 270 million pounds in committed liquidity as Michael mentioned this gives us a robust financial platform and the runway to focus on completing our overall disposal program which will help to reduce gross debt levels and support our medium term target to bring the leverage back below two times as part of our capital structure we use non-recourse receivable financing often called factoring to both diversify our sources of finance and also reduce cost At the prior year end we benefited from a £50 million one-off arrangement with KLK and also utilised around £115 million of non-recourse facilities provided by banks. The KLK purchase arrangement was fully repaid in Q1. At 30 June bank factoring was circa £150 million. So overall we reduced net factoring usage which reduces our operating cash flow by £15 million in the period. Turning finally to cash flow and our year end expectations for leverage on slide 11. As a result of significant increases in raw material prices and the normal seasonality in our business, the usual H1 net working capital outflow was higher than last year at £90 million, partially offset by a reduction of 8% in inventory volumes since the year end as we continue to manage our stock levels. As seen in previous years, this seasonal outflow will reverse in the second half, especially assuming raw material prices moderate, as we have already started to see. CapEx in H1 was £33.5 million. Of this, £9 million relates to growth initiatives, £5 million to the rollout of the penultimate wave of our ERP programme, and the balance is SHE and maintenance. For the full year, we continue to expect CapEx to be around £70 million, significantly less than 2025. Finance costs for the first half were £35.4 million. This was up £5.3 million on the prior year, reflecting the higher average level of drawn debt, repayment of the bond stub in July 2025 and the increased interest costs within our new facility, where the weighted average cost of debt on a cash basis is now 50 basis points higher than h1 2025 for the full year we now expect interest costs to edge up a little to around 73 to 75 million pounds in the income statement but remain around the 65 million level in terms of cash as mentioned the reduction receivables financing use reduced our free cash flow in the period whereas last year it improved it However, if we strip the receivables movements out, the underlying pre-cash flow in H126 was 66 million, only slightly higher than the 57 million outflow in H125, reflecting the higher raw material prices. Looking forward to the year end, taking the seasonal reversion working capital together with our other forecast assumptions for H2, we would expect to see the pre-cash flow for H2 significantly strengthened. On the same basis, excluding receivable financing movements, we now expect to be free cash flow positive for the year as a whole, an improvement on our expectations at the April results. Taking all of this together with the disposal of accolade monomers, which involves a diary payment of £5 to £7 million, we would expect to reduce covenant leverage to between 4 and 4.35 times by the year end. which is also ahead of our expectations at the start of the year. With that, I will pass back to Michael to discuss our strategic progress and at the end we will open the lines for Q&A.

I'm now going to take you through our strategic progress in the first half. But before I do, let me briefly remind you of the key element of the strategy which has guided and will continue to guide how we are transforming the business. All five pillars and three enablers on slide 13 provide executable actions for us. And this is our strategic direction, another slide which you will be familiar. All our plans are focused on progressively creating a business that is more specialty weighted, more geographically balanced and more streamlined. I will take you through each of our three divisions in turn to highlight the key actions we took in the first half in support of our strategy. So let's start with CCS on slide 15, our most specialty-weighted division. The strategic opportunity in CCS is compelling. We have leading positions in solutions that enhance coatings applications, energy efficiency and waterproofing in all sorts of construction. a global network in high-performance technology platforms, sustainability and regulatory tailwinds which underpin GDP Plus growth, and, maybe most important, a healthy innovation pipeline. From that position of strength, CCS is working on an increasing range of profitable growth opportunities. In the first half, that focus translated into strengthening our presence in several high-growth sub-segments. for example our volumes in intumescent coatings doubled year on year driven by demand from ai data centers and infrastructure projects and we are working with a growing number of customers in battery storage medical and filtration applications we continue to improve the geographical balance of ccs through refreshed regional growth strategies which means key account management for our top global customers and targeted marketing to new customers in north america the middle east and asia our specialty focus value selling disciplines and pricing strategies ensured prompt pass-through of high raw material cost to customers our portfolio improvements we continue to embed a more end market focus and faster speed to market innovation strategy and we are managing our manufacturing footprint through partnerships to localize production increase efficiency and be closer to our customers ongoing cost optimization measures include annualizing and further adding to the benefits of the cost reduction program initiated in 2025 continuous capacity management including temporary reallocation of people and assets and progressing further inventory management measures to enhance cash flow. Turning now to adhesive solutions. As a reminder, AS benefits from leading positions in EMEA and the Americas, deep and long-term customer relationships and a market-focused innovation pipeline with a strong sustainability angle. AS delivered a robust performance despite relatively subdued underlying market conditions driven by growth in new sustainability focused products such as specialty tapes and labels including our new climber branded lower carbon footprint products benefiting from iscc plus mass balance certification we have also made progress in new medical end markets and we are winning additional business in china our china innovation center and local partnerships are helping to localize manufacturing win additional customers and broaden our end market exposure demand for some of as-based chemical products in europe and the us also benefited from selective competitive capacity challenges during the second quarter as i mentioned our performance improvement program launched in 2023 has now delivered cumulative benefits of 40 million pounds since inception massively improving the margins in this division and we are targeting 43 million pounds or more going forward the as ebda margin of 12.1 percent in the first half compares with 5.4 percent at the time of the division's total transformation program launch three years ago a transformation that speaks for itself. As Ian mentioned, volume growth in the period would have been higher, but for continued intermittent reliability issues in the Netherlands and the Longview facility in Texas shared with Eastman, both of which are expected to be resolved in the third quarter. In fact, we are back up and running in Middleburg, Netherlands as of last week. Let's look at HPPM now, our predominantly based chemicals division. The most significant business in HPPM remains our position as market leader in the £3 billion NBR market, with hygiene and emerging market megatrends supporting approximately 6% annual growth. Elsewhere we are focused on selective attractive niches within performance materials, driven by strong customer relations, process innovation and emissions reduction. The performance of our health and protection business in the period was strongly correlated with competitors dynamics. Our strong market position, manufacturing expertise and procurement capabilities meant that H&P volumes and pricing inflected significantly upwards particularly in April and May as the Iran conflict disrupted competitors value chains. Underlying glass demand growth remains robust, but pricing and margins across the industry continue to be volatile, reflecting the changes in the supply-side environment since the pandemic. We continue to make longer-term progress through innovation in reusable glass, more complex disposables and lower carbon materials. Our foam and specialty vinyl polymer businesses experienced reduced end market demand during the second quarter in particular, while paper and carpet markets in Europe proved relatively more resilient. We maintain a continued focus on cost savings and efficiencies and we are making encouraging progress in selective innovation projects such as enhancing the circularity of the carpet value chain. As previously touched upon, we announced the divestment of our Accurate Monomer business in June, our fourth transaction since the 2022 strategy review. Achieving this important goal, which removes the highly cyclical and capital-intensive upstream business from our portfolio, was supported by the team's success in substantially reducing AM's losses from £5 million last year, H1, to almost break even this year. we will provide further updates on our ongoing broadened divestment program added advances coming now to current trading and the outlook as we have described in h1 we delivered strong progress driven primarily by sustainable strategic growth and continued self-help initiatives this has been led by new products and new markets and customers a focus on innovation Deliberate steps to strengthen our market position and targeted cost actions. We achieved this despite a substantially more complex operating and commercial environment, a testament to the speed and agility of our teams, our in-region, for-region manufacturing model, our world-class procurement capabilities and ability to pass through raw material price increases to customers. As Ian said, the majority of this was from the EBDA progress we are making from strategic growth initiatives and self-help, approximately 8 million pounds net in H1, and which we expect to continue. The reminder was from Q2 activity uplifts, mainly in base chemical product areas, principally in health and protection, that we are not currently forecasting will recur in the second half. So combining the strong H1 outturn and a broadly similar level of recurring strategic and self-help progress as we saw in the first half to the second half, the result is an upgrade to our full year outlook. This now sits slightly ahead of current market expectations for 2026. And as Ian took us through, our free cash flow expectations have also increased and we expect to reduce leverage meaningfully by this year end to between 4 and 4.35 times excluding any further divestments from 4.9 in June. So bringing all this together, our ambition is to substantially and sustainably grow earnings in the medium term and the first half of 2026 has reinforced our confidence in achieving that objective we are continuing to deliver the multi-year strategic transformation to improve the quality of our earnings and increase our operating leverage by focusing on higher margin more resilient specialty products in long-term attractive markets this is the right strategy for us We are encouraged by the new product growth and market developments achieved in the first half, with the business delivering its opportunities for sustained long-term growth in a tangible way. Of course, it was also helpful that our robust business model meant we saw some additional upside from the market disruption in Q2, but we do not count on this continuing in the outlook or in our plans. Instead, our upgraded outlook for full-year earnings and cash generation reflects the progress we are making against our strategic objectives and the operational discipline we have maintained throughout. Meanwhile, the recent refinancing and our ongoing portfolio rationalization plans provide further runway to reduce debt, which has been our most significant challenge over recent years. to wrap up the opportunity to sustainably improve the earnings power of splinter mare is becoming increasingly clear as ever it rests on three reinforcing drivers further self-help actions our continuous focus on innovation and strategic delivery and end market growth with that we are now happy to take your questions thank you very much sir